Kurdistan Iraq new pipeline

Kurdistan Iraq new pipeline final test data before oil starts flowing for the first time directly across the border to Turkey.
By News Teamin DirectorsTalk Highlights, Oil and Gas0

On a hot and dusty plateau in Iraqi Kurdistan, engineers in hard hats are gathered around a section of new pipeline as they check final test data before oil starts flowing for the first time directly across the border to Turkey. Twin flare towers behind a bank of storage tanks send viscous black smoke billowing into the sky.

The powerful smell of sulphur is an indicator of the quality of what lies underground. “It’s the champagne of Kurdistan,” grins Joe Stein, a softly spoken Texan who is operations manager for the joint Turkish-Chinese venture at Taq Taq, part of the last great onshore oilfield in the world. “It’s very light. It’s very good for refineries. It’s high grade and easy to produce. It’s golden oil.”

Hydrocarbon wealth is transforming this strategic corner of the Middle East at a time of dramatic change and extreme violence across the region – elsewhere in Iraq itself, where a post-2006 record of 1,000 people were killed in May alone, as well as in neighbouring Syria.

With an estimated 45bn barrels of reserves – the fourth largest in the world – and a century’s worth of natural gas, the Kurdistan regional government (KRG) has become a big player in a geologically exciting but politically sensitive market.

The pipeline from the Turkish-Chinese venture at Taq Taq, part of the world’s last great onshore oilfield.

Final section of the new pipeline from Taq Taq will tie in to the border metering station at Fishkhabour, allowing 300,000 barrels of crude a day to begin flowing into Turkey. Targets are 1m barrels a day in 2015, and 2m in 2019.

Crucially, this is being done without the approval of the federal government in Baghdad, which is locked in a bitter dispute with the KRG over the terms of the Iraqi constitution and the revenue-sharing that is supposed to flow from it. Economic independence – and perhaps more – is suddenly within sight for a sizeable chunk of the world’s biggest group of stateless people.

“Sharing wealth is a fundamental instrument of power,” argues Ashti Hawrami, the KRG’s natural resources minister. “By not implementing the constitution, Baghdad is encouraging instability and disintegration. The only way we can survive is by having economic development. Slogans about democracy are not enough.”

Officials in Erbil, the KRG’s booming capital, complain that Nouri al-Maliki, Iraq’s Shia prime minister, is wedded to the same authoritarian style and centralised administration that the Kurds hoped had gone with Saddam Hussein. Based on their share of the country’s population, the KRG is supposed to get 17% of national revenues. Baghdad in turn accuses the Kurds of acting unconstitutionally. The KRG retorts that whatever they earn, they will pay 83% into the national treasury.

“There is a huge gap between this Iraq and the other Iraq,” muses Fuad Hussein, an adviser to the KRG president, Massoud Barzani, whose photograph adorns every government office. “My generation grew up in Iraq and we were part of the Kurdish resistance. The new generation already has freedom. They will not accept losing it again.”

Other contentious issues include payment for Kurdish peshmerga fighters, compensation for the victims of Saddam’s genocide and the status of disputed areas such as Kirkuk, from where Kurds were ethnically cleansed. But oil and the new link with Turkey are giving the KRG a strong hand to play in the game of nations.

Seeking to mend fences, Maliki visited Erbil for the first time in two years on Sunday, but his talks with Barzani were largely symbolic. “Neither I nor President Barzani has a magic wand,” he quipped.

Barzani had warned that the latest contacts with Baghdad were the last chance, with the oil multinationals now calling the shots. Exxon Mobil’s landmark agreement with Turkey, risking retaliation against its own operations in southern Iraq, is at odds with US government policy. Maliki has condemned it outright as illegal. But Chevron, Total and Russia’s Gazprom are taking risks too. Fifty companies have invested $20bn (£13bn).

Iraq has had an oil industry since the 1920s but Kurdistan’s was started from scratch in 2006 because it was never developed under Saddam, who milked the country’s hydrocarbon wealth to buy weapons to kill Kurds in the infamous Anfal campaign and to invade Iran and Kuwait. “This is all oil Iraq never knew it had,” says an official in Erbil. “It’s intoxicating. There is a sense of history about what is happening here.”

The row over the unpaid revenues is grimly familiar, says the independent journalist Hiwa Osman. “For the KRG, it feels as if it’s still dealing with the same Baghdad. Its economic sanctions are straight from Saddam’s playbook.”

Kurdistan’s stability is a strong pull for foreign investors. Security at Taq Taq is run by a UK company employing former South African special forces, with the KRG’s oil-protection force guarding the perimeter and Ashaish, its CIA-trained intelligence service, watching closely. Peshmerga checkpoints line the roads to Mosul and Kirkuk, where al-Qaida bombings are as frequent as in Baghdad.

Erbil has become the exploration capital of the world, and the bars of its best hotels echo with multilingual banter about oil and associated deals. The Turkishenergy company Genel, partnered with China’s Sinopec at Taq Taq, is run byTony Hayward, the former BP chief executive who was forced to quit after theDeepwater Horizon disaster in the Gulf of Mexico.

In the face of such intense interest, awareness is growing of the effect on the KRG economy and the urgent need for a skilled local workforce. “Now everyone wants to go to university to do an oil-related degree,” says a young professional woman, “but we don’t yet have the resources.” Her husband has just quit a secure civil service job to move into private-sector oil services. It looks like a smart and potentially lucrative career choice.

Outside of government circles, some suspect Turkey’s motives – not surprising given its historic hostility to the Kurds. There is a vivid reminder in the shadow of Erbil’s ancient citadel, where young men collect signatures in support of Abdullah Öcalan, the jailed PKK leader whose peace talks with Recep Tayyip Erdogan are another important strand of the region’s shifting geopolitical landscape.

“Oil in Kurdistan is not just about Iraq,” argues Asos Hardi, of the independent newspaper Awene. “It’s about relations with Syria, Iran and with the US, which opposes what the KRG is doing. Everyone is using Kurdistan.

“Erdogan wants to play the Kurdish card. That’s his game, not an independent Kurdistan.”

Exactly how and where oil revenues will be spent is another worry. Hawrami’s officials highlight “capacity-building” agreements under which foreign companies pay for facilities that give ordinary Kurds a share of the region’s wealth. Norway is cited as an example of prudent planning and diversification. Gorran, the main opposition party, complains of corruption and nepotism in Barzani’s KDP. But Kamal Kirkuki, the party spokesman, dismisses “negative propaganda by an unhealthy and immature opposition”.

Uncertainty about the future has been a staple of Kurdish life for decades. But Taq Taq and other oilfields, Turkey’s volatile politics and voracious energy needs, and the ambitions of the world’s biggest oil companies are creating new options. For the moment the Kurds of Iraq seem to be improving their bargaining position to try to force a reluctant Baghdad to comply with the federal constitution. If that does not happen, then all bets are off.

“Iraq is going to hell,” says Hussein, Barzani’s adviser. “If we cannot live together we must talk about something else. We Kurds are not part of the conflict between Shia and Sunnis. But if there is a fire in the house next door, it will burn you too in the end. And there is no fireman.”

Foreigners have heard this message, and tend to agree. “Iraq is disintegrating slowly,” observed an Erbil-based diplomat. “Over the last two years the Kurds have been pushed into a corner. Baghdad is no longer their point of reference so they started looking elsewhere. Now Turkey is giving them the possibility of making money out of oil. But oil could be a trigger for the division of Iraq. If there is no agreement on oil, there is no Iraq.”

A troubled history

Iraq’s 5 million Kurds have experienced relative stability since the end of the 1991 Gulf war, when they were liberated from Saddam Hussein and lived under a no-fly zone protected by US and British air power.

A persecuted people who famously had “no friends but the mountains”, they were allied with the post-cold war world’s only superpower. Iraq’s 2005 federal constitution gave the Kurdistan regional government (KRG) an unprecedented degree of self-government.

But the last few months have also held out the prospect of change for the 14-17 million Kurds in Turkey, where the prime minister, Recep Tayyip Erdo&#287;an, is in negotiations with the jailed Abdallah Öcalan, leader of the PKK and its 30-year insurrection.

Syria’s 1.6 million Kurds have made big gains since the uprising against Bashar al-Assad and now control the north-east of the country – though their status has bedevilled relations with the Arab opposition.

Kurds in Iran (7 million) enjoy minority rights but experience persecution. The Tehran government is concerned that PKK fighters leaving Turkey may now launch attacks inside Iran. Öcalan has talked of creating a “stateless union” between Kurds in Turkey, Iraq, Syria and Iran, which would increase integration while maintaining national borders.

Kurdish leaders everywhere are painfully conscious of a history of oppression and betrayal by supposed friends. Hopes for statehood after the first world war came to nothing and the British put down a Kurdish revolt in Iraq in the 1920s. In 1946 the short-lived Mahabad republic in Iran was abandoned by the Soviet Union. In 1975 the US withdrew its support for an Iraqi Kurdish rebellion mounted from Iran and secretly aided by Israel, as part of a rapprochement between Baghdad and the Shah of Iran. “Covert action,” Henry Kissinger told Mullah Mustafa Barzani, father of the current KRG president, “is not missionary work.”

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